1.

Suppose the demand and supply curves of salt are given by: Qd = 1000 - p Qs = 700 + 2p (a) Find the equilibrium price and quantity. (b) Now suppose that the price of an input used to produce salt increased so that the new supply curve is Qs = 400 + 2p How does the equilibrium price and quantity change? (c) Suppose that the government has imposed a tax of Rs. 3 per unit of sale. How does it affect the equilibrium price and quantity?

Answer» Suppose the demand and supply curves of salt are given by:
Qd = 1000 - p
Qs = 700 + 2p
(a) Find the equilibrium price and quantity.
(b) Now suppose that the price of an input used to produce salt increased so that the new supply curve is
Qs = 400 + 2p
How does the equilibrium price and quantity change?
(c) Suppose that the government has imposed a tax of Rs. 3 per unit of sale. How does it affect the equilibrium price and quantity?


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